Shares Of Mid Cap Stock Fall 19%, Sharekhan Sees 22% Upside Potential Now, Buy Call Raised

1. Suprajit Engineering Stock Performance & Return

The last trading price of the stock is Rs 330 apiece with an intraday fall of 0.72%. The stock's 52-week high is Rs 478 apiece and 52-week low is Rs 272 apiece, respectively. The stock has jumped 87% in last 3-years and 3% in last 5-years. The shares have fallen 19% in last 1-year. The stock operating in Auto Ancillaries sector has a market capitalisation of Rs 4,572 crore.

2. Diversified And De-Risked Business Model

SEL has evolved as a well-diversified and de-risked company over through continuous focus on improving technology, widening product portfolio, enhancing content per vehicle, increasing geographical penetration and building multiple brands.

Over the last two and half decades, the company's profile has changed considerably, led by strategic acquisitions in its core expertise areas and successfully integrating various business verticals, while gaining market share across segments and geographies.

3. Management Remains Positive On Growth Prospects

The management remains positive on the outlook, though noted risk of geo-political tensions. The company expects its exports to grow robustly going forward, with share of exports improving to ~55% in FY23E from 40% in FY22.

The capex plans remain intact with FY23E capex at ~Rs140 crore, while the LDC division Capex is expected to be ~US $ 2-3 million in FY23E.

4. Valuation

According to Sharekhan, "Propelled by a robust business outlook and prudent capital allocation, we expect Suprajit's earnings to report a 24.3% CAGR during FY2022-FY2024E, driven by a 27.2% revenue CAGR, partially offset by a 50 bps decline in EBITDA margins. The stock trades at a P/E multiple of 14.9x and EV/EBITDA multiples of 9.8x its FY25E estimates, trading below its historical average. We retain our Buy rating on the stock with a revised price target (PT) of Rs.403."

Key Risks: Chips supply shortage, rising commodity prices, and transportation constraints remain key concerns. Moreover, delayed approval from OEMs for incremental business may affect performance.

5. About Suprajit Engineering

Suprajit is a global leader in the automotive cable and halogen bulb industry. With a competitive manufacturing base in India, UK, US, and Mexico, along with technical and logistical support worldwide, the company provides optimal product development and manufacturing solutions to its domestic and international customers.

With a CAGR of over 25%, Suprajit has one of the largest manufacturing capacities in the world with 300+ million cables per year and 110+ million bulbs per year.

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.